How restaurants load up the value of gift card programs
Originally published by Supervox on September 28, 2018.
Tree trimming. Santa visits. Gift card sales. Some things are holiday perennials.
In fact, for restaurants, holiday gift card sales are stronger than ever—and gift cards are increasingly driving sales throughout the rest of the year, too.
It’s no surprise, then, that every restaurant seems to offer them. What’s really interesting to us is how the industry’s smartest players maximize the potential of their gift card programs.
Like everything else in our technologically driven marketing landscape, gift cards have evolved with time. It wasn’t so long ago that restaurants were selling gift certificates. In the new millennium, they were supplanted by plastic, and today an ever-increasing percentage of sales are claimed by e-gift cards.
But the principal behind gift card sales remains the same. They’re a convenience to give, a delight to receive, and smart as hell to sell.
FREE MONEY—AND SO MUCH MORE.
Gift cards, at their most basic level, are an interest-free loan for a restaurant. The operator essentially tells the purchaser, “Give me money now, and I’ll pay you back later.” Moreover, many gift card users spend significantly more than they would have spent otherwise—up to 40% more.* Many people, in fact, treat a gift card as a license to splurge. “Instead of getting the $40 bottle of wine, they’ll go for $100 bottle. Instead of heading right to an entrée, they’ll add a round of appetizers,” says Kip Clayton, Vice President of Marketing for Parasole Restaurant Holdings. Gift card use also correlates to increased dining frequency, and gift card promotional tie-ins can be powerfully effective in solidifying your connection to customers by driving newsletter and email subscriptions.
Then there’s the fact that not every gift card “loan” gets called in. This is the phenomenon known as “breakage,” referring to the percentage of gift cards that are never—or only partially—redeemed (probably because they’re lost or forgotten).
If you’ve ever wondered why so many holiday gift card programs are deemed successful even when they bonus $20 on a $100 gift card purchase, that’s a big part of the answer.
Yet for the savviest restaurateurs, redemption is a good thing. Why? Because a high percentage of users are first-time visitors—people the restaurant hadn’t been able to attract through other marketing means.
A NEW BUSINESS ENGINE.
“Most gift card purchasers are regular guests, but they’re giving those cards to a lot of non-customers,” says Stephen Loftis, Vice President of Marketing for Charlotte-based Firebirds Wood Fired Grill restaurants. Think about it: They’re buying the cards because they love the concept and want to share it with others. That gift card is an endorsement of Firebirds. It says, “I’m not just recommending the restaurant to you. I’m going to foot the bill for you.”
That’s a pretty powerful way to get people in the door.
Not only that, gift cards are tremendously effective when used in a wide range of promotional campaigns, and they’re a smart tool for remediating disputes with guests, as they give the restaurant a chance to win back an unsatisfied customer on their return visit.
SIMPLIFY, STRENGTHEN & TARGET.
So how do smart operators reap all the benefits of a gift card program?
For one thing: “Make the buying process simple and easy,” says Loftis. “We’ve really enhanced the whole purchase funnel to improve the buying experience online and at our stores.”
For Firebirds, that means selling both electronic and plastic gift cards, in a variety of designs to suit the occasion and the style preferences of giver and receiver. It’s also essential, says Loftis, to have a rock-solid sales and fulfillment process. “You need a good technology partner. We use CashStar and have had a great experience.”
While CashStar and the dozen or so other gift card partners that service restaurants strive to make the process as turnkey as possible, the success of a gift card program ultimately depends on strategy—particularly in regard to the handling of gift card bonuses. “You can offer $10 on a $50 purchase, $20 on $100, or some other offer. There are a number of ways to skin it,” says Loftis. “How you handle the bonus is important not just because it offers more buying power for the purchaser, but it creates a pass-along factor that enables other gift giving.”
The pass-along phenomenon can spike guest counts—including visits from first-timers. You might buy $50 or $100 gift cards for friends or colleagues, for example, then give your $10 or $20 bonus cards to others, creating a multip…